The ACA defines “affordable” as an insurance policy with premiums not costing more than 9.5 percent of a worker’s household income, but there was a question about whether this affordability standard applies to self-only insurance policies or family insurance policies.

This is an important question, according to Merrill Matthews of the Institute for Policy Innovation. “When it comes to health insurance, the big cost is with family policies,” he notes.

Law Unclear on Definitions

The law is unclear on this point, but the Joint Committee on Taxation (JCT), whose recommendations the Congressional Budget Office followed in scoring the ACA, defined unaffordable coverage “as coverage with a premium required to be paid by the employee that is more than 9.5 percent of the employee’s household income, based on the self-only coverage,” according to a March 2011 JCT document.

On August 12 the Department of Treasury proposed regulations in line with this interpretation of the law. The proposed regulations make individuals eligible for the premium tax credit if their self-only coverage, not their family coverage, exceeds 9.5 percent of their household income.

That is causing consternation in some quarters.

“Advocates thought the ACA provided affordable coverage for workers and their families, but that’s not how CBO scored it,” says Richard Burkhauser of Cornell University, who studied this issue and coauthored a paper on it for the Employment Policies Institute.

Supporters Push for Reconsideration

Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities, said the possibility Treasury could make this type of determination was not known when ACA was being considered in Congress. She still hopes Treasury will adopt a different interpretation of the affordability standard in its final rule.

“We are treating this as a preliminary rule, and we will be making the strongest possible argument to urge Treasury to adopt a rule that gives people with access to insurance the same opportunities as those who do not have this access,” said Solomon.

She says a better way to interpret ACA is to “consider the affordability of coverage for an employee’s family as a whole” so that having access to an unaffordable employer-sponsored insurance policy will mean an individual is treated the same as someone whose employer does not offer insurance at all.

Major Impact on Budgetary Calculations

The final determination of this regulation will have a large impact on the cost of Obama’s law and the number of people covered. Using 2008 numbers, Burkhauser and coauthors Sean Lyons and Kosali Simons concluded there could be as much as a $50 billion difference, depending on how employers and employees respond to the regulations.

If this regulation is finalized in its current form, the actual impact on the cost of the subsidies to the taxpayer and the number of people eligible for subsidies is unknown. Solomon says she has looked at Burkhauser’s research and does not disagree with its numbers, but she notes Burkhauser and his colleagues include many caveats in their paper.

“People have been using the research in ways that are unfounded,” she says.

Matthews lays the responsibility for this multibillion-dollar error at the hands of the legislation’s supporters, who he says moved too quickly on such a large reform.

“If they hadn’t rushed this through Congress they’d have been able to vet it more thoroughly and might have caught this. That was not the administration’s goal, though,” Matthews says.

A legislative override of the regulation is unlikely, Matthews adds.

“You can’t fix this real easily. Any fix would add billions in costs to the pricetag of Obamacare,” Matthews says. “There’s no way the Republicans are going to agree to do that.”